Today?s announcement of a long term strategic partnership between Nokia and Microsoft creates a third credible ecosystem for smartphones as an alternative to the Apple and Google models.
This is indeed a win, win, win. It?s a big win for Microsoft, Mobile Operators and Nokia, possibly in that order.
Microsoft WP7 which has finally got a vendor partner with scale and with geographic presence in hundreds of countries where it has weak or limited brand presence. Microsoft more broadly finds an ally in its battle to monetize web assets and compete more vigorously with arch rival Google. Microsoft critically gains access to Nokia?s navigation, location and services assets which will help them with local search, advertising and customization.
The strategic alliance is a win for Nokia who surpassed our and most analyst expectations with the depth and level of commitment to make Microsoft WP7 its primary smartphone platform.
A standard OS licensing agreement where Microsoft was added as an OS choice to help out with the American problem would have been nothing more than a token effort. Analysts, media and investors may well have dismissed a standard license agreement as a half hearted effort as as the minimum required step leaving huge questions over how or when could Nokia build a modern scaleable OS to replace the fundamentally outdated Symbian.
Nokia has taken a very bold, ambitious step which signals that a) the PC business model with its associated outsourcing of R&D from vendors to Microsoft has arrived; b) represents a gamble that the need to combat the profit and revenue erosion from Apple?s vertically integrated model and Google?s Android will convince operators to actually range WP7 devices across their price tiers not just in the premium end and c) that Nokia has chosen to fight back by winning the rights to not just license WP7 but to shape its future evolution and win a basis for exclusivity and differentiation with core mapping and location assets.
The Microsoft/Nokia alliance potentially offers vendors an alternative to the inevitable but terrifying commoditization and flight of profits to Google in the fragmented Android ecosystem.
Beyond Nokia, if the ecosystem is successful in ramping up applications and compelling user experiences to compete with Apple and Google, the broader community of WP licensees will win due to the rising tide effect. The addressable market size for windows mobile devices will be dramatically increased as Nokia/Microsoft become the ?operator friendly? choice.
Operators who have seen their lunch eaten by Apple and Google win by having two powerful brands with massive marketing and go to market muscle help develop multiple new products to appeal to customers across multiple price tiers rather than having to rely on low cost but weak user experience product from new Android vendors.
Perhaps the biggest win for operators though is that Nokia can concentrate on catching up on handset design form factors where it has been weak for a decade or more.
A rejuvenated Nokia launching new form factors on a competent mobile OS with its huge marketing muscle and customer appeal will give operators greater flexibility on subsidy budgets.
So its all win, win, win IF Nokia can get back to the business of icon designs delivered on time to meet key selling seasons. Some key questions remain that we will be addressing for clients in the coming weeks:
Can Nokia execute? How will other Microsoft licensees react to the most favored nation status given to Nokia? How much will this announcement and subsequent products help Nokia establish a significant presence and share of profit in the critical North America market? Can Nokia time the decline in Symbian revenues, profits and volumes with the ramp of WP7 products which will be available ?in volume? in 2012.
Oh and what about losers? Symbian developers? Google? HTC and early windows mobile licensees?